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Spetember 11, 2003
The Bush administration today recommended the most significant
regulatory overhaul in the housing finance industry since the savings
and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new
agency would be created within the Treasury Department to assume More.. supervision
of Fannie Mae and Freddie Mac, the government-sponsored companies that
are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress,
to set one of the two capital-reserve requirements for the companies.
It would exercise authority over any new lines of business. And it
would determine whether the two are adequately managing the risks of
their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of
Fannie Mae and Freddie Mac -- which together have issued more than $1.5
trillion in outstanding debt -- is broken. A report by outside
investigators in July concluded that Freddie Mac manipulated its
accounting to mislead investors, and critics have said Fannie Mae does
not adequately hedge against rising interest rates.

''There is a general recognition that the supervisory system for
housing-related government-sponsored enterprises neither has the tools,
nor the stature, to deal effectively with the current size, complexity
and importance of these enterprises,'' Treasury Secretary John W. Snow
told the House Financial Services Committee in an appearance with
Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president
to appoint directors to the companies, a sign that the administration
is less concerned about the perks of patronage than it is about the
potential political problems associated with any new difficulties
arising at the companies.

The administration's proposal, which was endorsed in large part today
by Fannie Mae and Freddie Mac, would not repeal the significant
government subsidies granted to the two companies. And it does not
alter the implicit guarantee that Washington will bail the companies
out if they run into financial difficulty; that perception enables them
to issue debt at significantly lower rates than their competitors. Nor
would it remove the companies' exemptions from taxes and antifraud
provisions of federal securities laws.

At Coretta Scott King's funeral in early 2006, Ethel Kennedy, the widow of Robert Kennedy, leaned over to him and whispered, "The torch is being passed to you." "A chill went up my spine," Obama told an aide. (Newsweek)

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005
The United States Senate

May 25, 2006

Sen. John McCain [R-AZ]:

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Alas, thanks to the Democrat Party and the special interests of the left, both of these attempts to reform the banking system were still born.

But isn’t it funny how our watchdog media have missed these two stories?

So lets be clear here - neither Obama or McCain ever called for less regulation of this industry?

At Coretta Scott King's funeral in early 2006, Ethel Kennedy, the widow of Robert Kennedy, leaned over to him and whispered, "The torch is being passed to you." "A chill went up my spine," Obama told an aide. (Newsweek)

In 2002, McCain introduced a bill to deregulate the broadband Internet market, warning that "the potential for government interference with market forces is not limited to federal regulation."

Three years earlier, McCain had joined with other Republicans to push through landmark legislation sponsored by then-Sen. Phil Gramm (Tex.), who is now an economic adviser to his campaign. The Gramm-Leach-Bliley Act aimed to make the country's financial institutions competitive by removing the Depression-era walls between banking, investment and insurance companies.

That bill allowed AIG to participate in the gold rush of a rapidly expanding global banking and investment market. But the legislation also helped pave the way for companies such as AIG and Lehman Brothers to become behemoths laden with bad loans and investments.

McCain now condemns the executives at those companies for pursuing the ambitions that the Gramm-Leach-Bliley Act made possible, saying that "in an endless quest for easy money, they dreamed up investment schemes that they themselves don't even understand."

He said the misconduct was aided by "casual oversight by regulatory agencies in Washington," where he said oversight is "scattered, unfocused and ineffective."

At Coretta Scott King's funeral in early 2006, Ethel Kennedy, the widow of Robert Kennedy, leaned over to him and whispered, "The torch is being passed to you." "A chill went up my spine," Obama told an aide. (Newsweek)

He's only been in charge for the last 8 years, 5+ of which with a Republican Congress. How in the Hell could we place any, any do you hear, blame on the Idiot Child?

Speaking of liberal Idiot children just where have you been ?

The Congress is swarming with liberal critters all bent on saving Fannie Mac/Mae as their election honey pot.Where was your boy Clinton during all of this ?And just why isn't this thief in jail,it it because he is being protected by powefull Political people like Dodd, Reid and Barney Frank !

He sure sounds like a common white/black thief to me.What do you think CW ?:

Franklin Delano Raines (born January 14, 1949 in Seattle, Washington) is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton. Raines and the Obama campaign state that he does not advise them.........."Yeah Right !"

"I Love this part.The guy has all of the credentials of a high class thief of color.

The son of a Seattle janitor , 'Sent To Harvard on affirmative action Just Like Obama but at least he was born in America unlike Obama !"

Raines graduated from Harvard University, Harvard Law School; and Magdalen College, Oxford University as a Rhodes Scholar. "He and slick Willie sound like soul mates !"

Raines was of age during the Vietnam War, but performed no military service."Again Slick's Profile !"

He served in the Carter Administration as associate director for economics and government in the Office of Management and Budget and assistant director of the White House Domestic Policy Staff from 1977 to 1979.

Then he joined Lazard Freres and Co., where he worked for 11 years and became a general partner.

In 1991 he became Fannie's Mae's Vice Chairman, a post he left in 1996 in order to join the Clinton Administration as the Director of the U.S. Office of Management and Budget, where he served until 1998. In 1999, he returned to Fannie Mae as CEO, "the first black man to head a Fortune 500 company."

On December 21, 2004 Raines accepted what he called "early retirement" [3] from his position as CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. He is accused by The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses [4].

In 2006, the OFHEO announced a suit against Raines in order to recover some or all of the $50 million in payments made to Raines based on the overstated earnings [5] initially estimated to be $9 billion but have been announced as 6.3 billion.[6].

Civil charges were filed against Raines and two other former executives by the OFHEO in which the OFHEO sought $110 million in penalties and $115 million in returned bonuses from the three accused.[7] On April 18, 2008, the government announced a settlement with Raines together with J. Timothy Howard, Fannie's former chief financial officer, and Leanne G. Spencer, Fannie's former controller. The three executives agreed to pay fines totaling about $3 million, which will be paid by Fannie's insurance policies. Raines also agreed to donate the proceeds from the sale of $1.8 million of his Fannie stock and to give up stock options. The stock options however have no value. Raines also gave up an estimated $5.3 million of "other benefits" said to be related to his pension and forgone bonuses.[8]

An editorial in The Wall Street Journal called it a "paltry settlement" which allowed Raines and the other two executives to "keep the bulk of their riches." [9] In 2003 alone, Raines's compensation was over $20 million.[10]

A statement issued by Raines said of the consent order, "is consistent with my acceptance of accountability as the leader of Fannie Mae and with my strong denial of the allegations made against me by OFHEO."[11]

In a settlement with OFHEO and the Securities and Exchange Commission, Fannie paid a record $400 million civil fine. Fannie, which is the largest American financier and guarantor of home mortgages, also agreed to make changes in its corporate culture and accounting procedures and ways of managing risk.

TITLE I -- FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND INSURANCE COMPANIES

* Repeals the restrictions on banks affiliating with securities firms contained in sections 20 and 32 of the Glass-Steagall Act.

* Creates a new "financial holding company" under section 4 of the Bank Holding Company Act. Such holding company can engage in a statutorily provided list of financial activities, including insurance and securities underwriting and agency activities, merchant banking and insurance company portfolio investment activities. Activities that are "complementary" to financial activities also are authorized. The nonfinancial activities of firms predominantly engaged in financial activities (at least 85% financial) are grandfathered for at least 10 years, with a possibility for a five year extension.

* The Federal Reserve may not permit a company to form a financial holding company if any of its insured depository institution subsidiaries are not well capitalized and well managed, or did not receive at least a satisfactory rating in their most recent CRA exam.

* If any insured depository institution or insured depository institution affiliate of a financial holding company received less than a satisfactory rating in its most recent CRA exam, the appropriate Federal banking agency may not approve any additional new activities or acquisitions under the authorities granted under the Act.

* Provides for State regulation of insurance, subject to a standard that no State may discriminate against persons affiliated with a bank.

* Provides that bank holding companies organized as a mutual holding companies will be regulated on terms comparable to other bank holding companies.

* Lifts some restrictions governing nonbank banks.

* Provides for a study of the use of subordinated debt to protect the financial system and deposit funds from "too big to fail" institutions and a study on the effect of financial modernization on the accessibility of small business and farm loans.

* Streamlines bank holding company supervision by clarifying the regulatory roles of the Federal Reserve as the umbrella holding company supervisor, and the State and other Federal financial regulators which ?functionally' regulate various affiliates.

* Prohibits FDIC assistance to affiliates and subsidiaries of banks and thrifts.

* Allows a national bank to engage in new financial activities in a financial subsidiary, except for insurance underwriting, merchant banking, insurance company portfolio investments, real estate development and real estate investment, so long as the aggregate assets of all financial subsidiaries do not exceed 45% of the parent bank's assets or $50 billion, whichever is less. To take advantage of the new activities through a financial subsidiary, the national bank must be well capitalized and well managed. In addition, the top 100 banks are required to have an issue of outstanding subordinated debt. Merchant banking activities may be approved as a permissible activity beginning 5 years after the date of enactment of the Act.

* Ensures that appropriate anti-trust review is conducted for new financial combinations allowed under the Act.

* Provides for national treatment for foreign banks wanting to engage in the new financial activities authorized under the Act.

* The broad exemptions banks have from broker-dealer regulation would be replaced by more limited exemptions designed to permit banks to continue their current activities and to develop new products.

* Provides for limited exemptions from broker-dealer registration for transactions in the following areas: trust, safekeeping, custodian, shareholder and employee benefit plans, sweep accounts, private placements (under certain conditions), and third party networking arrangements to offer brokerage services to bank customers, among others.

* Allows banks to continue to be active participants in the derivatives business for all credit and equity swaps (other than equity swaps to retail customers).

* Provides for a "jump ball" rulemaking and resolution process between the SEC and the Federal Reserve regarding new hybrid products.

* Amends the Investment Company Act to address potential conflicts of interest in the mutual fund business and amendments to the Investment Advisers Act to require banks that advise mutual funds to register as investment advisers.

At Coretta Scott King's funeral in early 2006, Ethel Kennedy, the widow of Robert Kennedy, leaned over to him and whispered, "The torch is being passed to you." "A chill went up my spine," Obama told an aide. (Newsweek)